Orrstown Financial Services, Inc. :ORRF-US: Earnings Analysis: 2016 By the Numbers : January 31, 2017

Orrstown Financial Services, Inc. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Orrstown Financial Services, Inc. – Univest Corporation of Pennsylvania, Citizens & Northern Corporation, Bryn Mawr Bank Corporation and Penns Woods Bancorp, Inc. (UVSP-US, CZNC-US, BMTC-US and PWOD-US) that have also reported for this period.

Highlights

  • Net interest income margins widened from 64.16% to 64.93% compared to the same period last year.
  • Net loan assets changed 13.34% compared to same period last year and 13.34% from previous period, total deposits changed 11.65% compared to same period last year and 11.65% from previous period.
  • Earnings grew despite decline in operating margins and pre-tax margins compared to same period last year.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 56.28 53.51 52.73 49.9 60.89
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 6.63 7.87 29.14 10 -38.45
Earnings Growth (YOY) -15.82 -72.98 191.3 126.02 -20.3
Net Margin 11.78 14.71 55.27 20.05 -63.15
EPS 0.81 0.97 3.59 1.24 -4.77
Return on Equity 4.95 6.05 26.65 11.17 -35.62
Return on Assets 0.49 0.63 2.46 0.83 -2.87

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Earnings Growth Analysis

{arg3)’s earnings declined year-on-year because of the increases in loan loss provisions. Its net interest income after provisions margins went from 65.29% to 64.49%. The fall in earnings would have been worse were it not for the fact that the company’s net interest income margins improved, from 64.16% to 64.93%. For comparison, net interest income margins were 64.16% and net interest income after provisions margins 65.29% in the immediate last period.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 13.34% compared to the same period last year and 13.34% from the previous period. Total deposits changed 11.65% compared to the same period last year and 11.65% from the previous period.

Margins

Despite a decline in operating’s margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Orrstown Financial Services, Inc.

Company Profile

Orrstown Financial Services, Inc. operates as a holding company for Orrstown Bank, which provides a full range of consumer and business financial services. It engages in commercial banking and trust business which involves accepting demand, time and savings deposits, and granting loans. The company grants commercial, residential, consumer and agribusiness loans in its market areas of Franklin, Lancaster, Perry and Cumberland Counties in Pennsylvania and in Washington County, Maryland. Orrstown Financial Services was founded on November 17, 1987 and is headquartered in Shippensburg, PA.

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